Does Information Production Explain Bidder Liquidity after Takeovers?
Managerial Finance, Vol. 39, No. 10, pp. 915-937, 2013
Posted: 17 Dec 2015 Last revised: 3 Dec 2019
Date Written: 2013
Information produced in the takeover process and changes in firm characteristics could both affect bidder liquidity after takeovers. We examine bidder liquidity in successful versus unsuccessful takeovers to disentangle the information production hypothesis from the firm characteristics hypothesis empirically. We show that unsuccessful bidders experience no less information production than successful bidders during the takeover process, but only successful bidders enjoy significant liquidity improvements after their takeovers. Whether a takeover is successful or not generally does not have a significant relation with bidder liquidity changes once we control for detailed changes in firm characteristics. Moreover, additional information production reduces information asymmetry for successful Nasdaq bidders but not for NYSE bidders. These findings collectively support the firm characteristics hypothesis and suggest a role of information production for firms facing potentially higher information asymmetry.
Keywords: Mergers and acquisitions, liquidity, information asymmetry
JEL Classification: G14, G34
Suggested Citation: Suggested Citation